Traditional organizations are in crisis.

Let’s begin with a story of sabotage. 

At the peak of World War Two, the director of the agency that later became the CIA commissioned a special field manual. In the manual were guidelines for destabilizing communities and commerce. The idea was simple: give the manual to citizens friendly to the Allied forces and wage a war of what the manual described as “simple sabotage.”

Near the end of the manual, there’s a list of actions that interfere with organizations and production. 

Things like: making it hard to access work resources by setting up complicated bureaucratic systems, never allowing shortcuts that might speed up a process or decision, and adhering to all regulations, always.

When the author shows this list from the old manual to leaders, many laugh. “That’s exactly what people do where I work!” is the general response.

Here’s the key message: Traditional organizations are in crisis.

In short, what amounted to sabotage in 1944 is now just another day in the office.

Let’s be clear. It’s not that people are trying to be saboteurs. It’s that companies are structured in such a way that following protocol essentially amounts to sabotage.

This is having an unfortunate effect on companies in at least three ways.

For one, company lifespan is down. It used to be that a company on the S&P 500 could expect to spend 60 or so years there. Now it’s down to about ten.

Second, return on assets is also down. Return on assets is the amount of profit a company can generate with what it owns. In addition to being a great all-round metric of performance, it’s also hard to fudge. Unfortunately, since 1965, US return on assets has dropped from nearly 5 percent to just above 1 percent.

Third, productivity growth has also leveled off. Despite the fact that we’ve made incredible technological gains, we’re still unable to make more stuff per hour than we were ten or 20 years ago.

If you were to ask an economist why companies seem to be struggling, she’d probably scratch her head. If you ask the people at the edge, those workers on the ground dealing with day-to-day problems, you’ll get a clear answer: bureaucracy.